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VALUE ACTIVITY - an activity performed by the firm which is
technologically and strategically distinct from any other (as opposed to
accounting classifications, like "overhead," which group together
activities with disparate technologies). Primary Activities include: Inbound
Logistics; Operations; Outbound Logistics; Sales and Marketing; and Customer
Service. Support Activities include: Firm Infrastructure; Human Resource
Development; Technology Development; and Procurement. [Source: M. Porter] VALUE ADDED - is selling price less the cost of purchased raw
materials. Value added is not a sound basis for cost analysis because it
incorrectly distinguishes raw materials from the many other purchased inputs
used in a firm's activities. Value added fails to show the linkages between
a firm and its suppliers that can reduce cost or enhance differentiation.
[Source: M. Porter] VALUE CHAIN - disaggregates a firm into its strategically relevant
activities in order to understand the behavior of costs and the existing and
potential sources of differentiation. All of a firm's activities can be
represented in a value chain. The value chain displays total value, and
consists of value activities and margin. Value activities are the physically
and technologically distinct activities a firm performs. Value chains should
be drawn at the business-unit level. A company-wide or sector-wide chain is
too broad because it obscures important sources of competitive advantage.
[Source: M. Porter] VALUE CHAIN COST ANALYSIS - a cost analysis methodology which starts with assigning
human resource costs, operating costs and fixed asset costs to value
activities, and then studies the cost behavior of each activity as affected
by the cost drivers. [Source: M. Porter] VALUE CHAIN LINKAGES - are relationships between the way one value activity is
performed and the cost of performance of another (i.e., the link between
market research and product design; between quality control and customer
service; between computer maintenance and computer downtime servicing).
Linkages lead to competitive advantage in two ways: optimization and
coordination. [Source: M. Porter] VALUE DRIVERS - the basic shareholder valuation parameters, including:
sales growth rate, operating profit margin, income tax rate, working capital
investment, fixed capital investment, cost of capital, and value growth
duration. [Source: Alfred Rappaport, Creating Shareholder Value, New York:
The Free Press, 1986] VALUE SYSTEM - (usually shown graphically) describes the activity links
between the firm and 1) its suppliers; 2) other businesses within the firm's
corporate family; 3) distribution channels; and 4) the firm's end-user
customers. [Source: M. Porter] VALUES - the beliefs and principals of the organizational unit. VERTICAL LINKAGES - include channel linkages; supplier linkages; and buyer linkages. VERTICAL SCOPE - the extent to which activities are performed in-house instead of by independent firms. VULNERABILITIES -a listing of those factors that might make it difficult to achieve established business objectives. In essence, vulnerabilities serve as an input required to judge the probability of attaining the business goals. |
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